Question
Given the cash flows for two projects, M and N. Project M requires an initial investment of $50,000, and Project N requires an initial investment
Given the cash flows for two projects, M and N. Project M requires an initial investment of $50,000, and Project N requires an initial investment of $45,000.
Year | Project M | Project N |
1 | $12,000 | $10,000 |
2 | $14,000 | $11,000 |
3 | $16,000 | $12,000 |
4 | $18,000 | $13,000 |
5 | $20,000 | $14,000 |
(a) Calculate the NPV for each project using a discount rate of 7%.
(b) State your accept/reject decision.
(c) What would be your accept/reject decision if they were independent projects?
(d) Calculate the IRR for each project.
(e) Which project would you recommend if only one can be selected?
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Fundamental accounting principle
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
21st edition
978-0078025587
